This overview/background can be useful for any pi's about to...

This overview/background can be useful for any pi's about to invest in RRS...good reading!

http://www.rangeresources.com.au/operations/georgia/#c317

Georgia
Overview
Blocks VIa and Vlb Background
Background on Georgia
Range entered into a Heads of Agreement with unlisted UK company Strait Oil and Gas Limited (?Strait?) to acquire a 50% interest in two oil and gas blocks in the Republic of Georgia, Eastern Europe.

The two blocks subject to this agreement, Blocks VIa and Vlb cover a contiguous area of 7,000 sq km (approx 10% of the surface area of the Country) and were subject to significant exploration in the Soviet era. Please refer Figure 1 for outline of block locations.

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Blocks VIa and Vlb Background

A significant number of wells were drilled during the Soviet era (mainly in the 1980?s and early 1990?s) in and adjacent to the Blocks. Strait has undertaken a large scale review of all available data over the last two years with the assistance of recognised international oil and gas consultants RPS Energy. Key findings of the technical review include:

Very few of the approximately 200 wells were drilled with the specific objective of finding oil and gas reservoirs. Certain wells were drilled to relatively shallow depths, to further define structural features identified from surface geological mapping, and to assist in planning the location and design of water reservoirs. Deeper wells were drilled for the purpose of detailed identification of the stratigraphy of the area. Many of these wells found oil and gas shows, in which case they were shut in and abandoned without testing. Much of the work carried out by the technical staff of Strait has been to collate information from these diverse databases and to integrate the data into their own regional interpretation. Data reviewed includes seismic, gravity and magnetic, well, structural mapping and field analogues and reservoir data
An initial analysis of 24 areas identified 11 structures suitable for oil in place estimates and key targets for future drilling. Of these structures two are deeper than 2,500 meters and the rest are shallow features between 600 and 2,500 meters
Range has since updated this report - refer below
Seismic data has been processed and interpreted with the aim of identifying drill targets by late Q2 2010 / early Q3 2010 with drilling due to commence a minimum two well drilling program
In addition to the oil potential of the Blocks there are numerous prospective gas fields, which include highly prospective natural gas and coal bed methane targets. Of the 161 wells drilled for gas, 22 displayed potentially commercial flow rates. Early production could be attained by supplying the local city of Kutaisi (second biggest in Georgia) with a dedicated natural gas supply.

Seismic vehicle
Under the terms of the agreement, subject to standard due diligence, shareholder and regulatory approvals, Range (to earn its 50% interest):

will complete Phase II under the relevant Production Share Agreement (PSA) applicable to the blocks, consisting mainly of 350 km of 2D and 3D seismic and well selection
make the following equity payments to Strait?s nominees:
20m Range Shares and 20m Range Options (RRSOA) upon due diligence completion and obtaining relevant shareholder approvals -completed;
20m Range Shares and 20m Range Options upon completion of Phase II under the PSA - completed and
30m Range Shares and 30m Range Options upon completion of the first 2 wells under the PSA or a commercial discovery, whichever occurs first.
appoint a Strait nominee to the Range board upon regulatory and due diligence completion
Following completion of Phase II under the PSA, Range has the following in respect of the residual 50% interest in the Blocks:
Range has standard commercial pre-emptive rights and tag along rights;
Range can invite farm in partners on shared, pro rata terms with Strait; and
Range will ?finance carry? the residual 50% on the basis of a loan account repayable at LIBOR plus 2% from production cashflow if an event above has not occurred.
Subsequent to completion of the Heads of Agreement to complete Phase II of the PSA, approval was obtained from the Georgian Government for The Geophysical Institute of Israel to commence the 2D seismic operation on both Blocks.

Mobilisation of the vibrosis equipment was completed in October 2009 and after independent testing and technical audit the seismic operation started in November 2009, with the successful acquisition of 410km of 2D seismic completed late March 2010, with the Georgian Government providing signoff of the successful completion of Phase II of the PSA.

Following the successful acquisition of 410km of seismic at the end of March 2010, seismic processing and interpretation has been ongoing.

Regional field mapping was completed over the entire two block area on a 1:100,000 scale which was followed up by state of the art remote sensing applications by Fugro-NPA which were integrated with all available historical Soviet era data to produce a refined surface geology map of the two blocks which will then be used to focus the mapping follow-up programme. Detailed geological and structural mapping along all seismic profiles have been completed with 75% of the terrain between the seismic profiles having been mapped in detail with the primary focus on the most prospective areas.

Ultra-high resolution, multi-spectra imagery is being used in areas of higher potential to refine the regional geology with several 3-D cross sections currently under construction which integrate all available surface and sub-surface data and historical drilling.

Exhaustive searches of all possible archives have successfully turned up critically important historical well data which has provided invaluable direct well ties with new seismic data. In November 2010, results of the Seismic Interpretation, Field Mapping and Evaluation of Prospective Hydrocarbon Volumes across the Company?s two Georgian blocks (Block VIa and Block VIb) were received from leading International Oil and Gas Seismic Consultancy firm RPS Energy.

RPS identified a total of 68 prospective structures across the two blocks that have been determined to be viable prospects for drilling. Total combined potential oil in place across these 68 indentified prospective structures amounts to 2,045 million barrels. Recovery factors for oil in place can be conservatively estimated at 30%.

Of the 68 identified prospective targets across the two blocks, 6 structures have been prioritised as being ready for drilling. Of these 6 structures, total oil-in-place has been estimated at 730 million barrels.

A breakdown of the oil-in-place for these 6 ?ready to drill? prospects are as follows:

Prospect Oil-in-Place (gross)
Total 730 million barrels
Kursebi 1 (K1) 123 million barrels
Kursebi 2 (K2) 160 million barrels
Kursebi 3 (K3) 42 million barrels
Vani 1 (V1) 171 million barrels
Vani 2 (V2) 89 million barrels
Vani 3 (V3) 145 million barrels

A number of the prospective targets across the two blocks, including the 6 prioritised prospects identified above
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Background on Georgia
Since the Rose Revolution, Georgia has focused on developing its political and economic systems to Western European standards. Following the unrest with Russia in 2008 Georgia has returned to a state of civil order. The European Union has acted as an advisor, establishing a base and opening a branch of the European Bank for Reconstruction and Development in the capital Tbilisi. Some key background points include:

Georgia was named the year's number one reformer in the World Bank's 2007 "Doing Business Survey," improving its overall ranking from 112 to 37.
Significant decrease in corruption in the public and private sectors made Georgia the World Bank's top anticorruption performer in 2006 "Anticorruption in Transition-3" (ACT3) report.
Repatriation of profit. Foreign investor?s rights and guarantees are equal to those granted to Georgians. Profit and property repatriation is allowed.
Infrastructure: Located at the crossroads of Europe and Central Asia, Georgia?s three major oil and gas pipelines, Black Sea ports, well-developed railway systems, together with its airports are playing an increasingly important role, linking East & West. The Georgian Railway, one of the crucial links in Eurasian transit, serves as a short-cut between Europe and Central Asia, carrying 3.9 million passengers and 22.6 million tons of cargo in 2006. Georgian Railway now directly links to the railway systems of Armenia, Azerbaijan and Russia.
Oil and Gas Pipelines: Georgia plays an important role as a strategic crossroad for hydrocarbon transit in the Caspian region. During the last ten years, approximately $5 billion has been invested to develop the three major oil and gas pipelines that cross Georgia including:
The Baku-Tbilisi-Ceyhan (BTC) pipeline, completed in 2005 at a total construction cost of nearly US$4 billion, can transport up to a million barrels of oil a day from the Sangachal terminal in Azerbaijan to a newly constructed marine terminal in Ceyhan on the Turkish Mediterranean coast.
The South Caucasus gas Pipeline (SCP), completed in 2006, will carry natural gas from the Shah Deniz field in the Caspian Sea to customers in Georgia, Turkey and Azerbaijan.
Construction of two new pipelines across Georgia increases its role as a strategic crossroad for hydrocarbon transit in the Caspian region. One pipeline will run just south of the Blocks.
Oil seeps are widespread in Georgia, with exploration in the country have commenced during the 19th century, by exploitation of the surface seeps and shallow drilling beneath them. The first substantive discovery, the Supsa Field near the Black Sea, was made in 1889 and still produces small amounts of oil today.

Georgia is a reasonably well established hydrocarbon producing province with a number of discoveries and seeps along the Greater Caucasus and Achara-Trialet frontal folds, which are present along the northern and southern margins of the two license, where there are numerous oil and gas seeps.

However, there have only been 23 small to medium size discoveries to date, with the largest being the Samgori field, which was discovered in 1974 and has produced more than 165mmbbls to date, with an estimated 200mmbls of recoverable reserves. Nevertheless, the trend of oil discoveries in Georgia confirms the presence of a working hydrocarbon system that extends from Georgia into the Black Sea.

Following completion of Phase II under the PSA, Range has the following in respect of the residual 50% interest in the Blocks:
Range has standard commercial pre-emptive rights and tag along rights;
Range can invite farm in partners on shared, pro rata terms with Strait; and
Range will ?finance carry? the residual 50% on the basis of a loan account repayable at LIBOR plus 2% from production cashflow if an event above has not occurred.
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